Weight loss medications and non-alcoholic beverages are causing a shift in consumer behavior, leading many in the U.S. to hold off on purchasing sodas.
Novo Nordisk’s Ozempic, now available in pill form, has been linked in a recent study to a reduced risk of heart attacks and strokes. Despite this trend, Coca-Cola announced strong earnings for the second quarter on Tuesday, buoyed by high global demand for its beverage products, which has led the company to increase its full-year outlook.
“We are pleased with our second-quarter performance, achieving solid growth in both revenue and operating income amid a shifting market landscape,” stated Coca-Cola CEO James Quincey.
However, the company reported a 1% decline in volume sales in North America for the quarter. During the earnings call, Quincey attributed the decrease in the U.S. segment to “softness in away-from-home channels,” impacting sales across its water, sports drinks, coffee, tea, and soda categories.
This decline was somewhat mitigated by growth in its Fairlife milk brand and its flagship Coca-Cola soda, which ranked among the top two in retail sales growth for the quarter.
To counteract the sales dip, Coca-Cola is collaborating with fast-food chains to include its soda in combo meal deals, with reports indicating a partnership with McDonald’s to enhance its $5 meal option that comes with a soft drink.
Overall, Coca-Cola’s results exceeded analysts’ predictions. For the second quarter, the company reported revenues of $12.4 billion, translating to approximately $0.84 per share. Analysts had expected $11.76 billion in revenue or about $0.81 per share, according to FactSet.
Coca-Cola has now raised its forecast for organic revenue growth to between 9% and 10%, up from its earlier estimate of 8% to 9%.
Similarly, Pepsi is facing challenges in attracting U.S. consumers, who are increasingly favoring products that emphasize weight loss and healthier choices. A Gallup poll indicates a significant decline in alcohol consumption among young adults in the U.S. In early July, Pepsi cited a number of product recalls as a reason for its lackluster performance in the second quarter.